US long-term average mortgage rates rose more than 6% this week for the first time since the 2008 housing crash, threatening to drive more buyers out of a rapidly cooling housing market.
Mortgage buyer Freddie Mac reported Thursday that the 30-year rate rose to 6.02% from 5.89% last week. The long-term average rate has more than doubled from a year ago and is the highest since November 2008, just after the housing market crash triggered the Great Recession. A year ago, the rate stood at 2.86%.
Rising interest rates, in part as a result of the Federal Reserve’s aggressive push to control inflation, have cooled a housing market that has been active for years. Many potential home buyers are being pushed out of the market as higher rates have added hundreds of dollars to monthly mortgage payments. Existing home sales in the US have fallen for six straight months, according to the National Association of Realtors.
The average rate on 15-year fixed-rate mortgages, popular with those looking to refinance their homes, rose to 5.21% from 5.16% last week. Last year at this time the rate was 2.19%.
Mortgage rates don’t necessarily reflect Federal Reserve rate increases, but they do tend to track the yield on the 10-year Treasury note. That’s influenced by a variety of factors, including investor expectations about future inflation and global demand for US Treasuries.
Recently, accelerating inflation and strong economic growth in the US have pushed the 10-year Treasury rate up sharply to 3.45%.
The Fed has raised its benchmark short-term interest rate four times this year, and Chairman Jerome Powell has said the central bank will likely need to keep interest rates high enough to slow the economy “for some time.” “to master the worst. inflation in 40 years.
More inflation data this week suggests that while gasoline prices have receded significantly since early summer, the prices of most other necessities have actually risen, terrifying investors fearful of a possible recession. if the Fed keeps raising rates.
Most economists forecast the Fed will raise its primary interest rate another three-quarters of a point when central bank leaders meet next week. Some fear the Fed could raise the rate by a full point, following back-to-back gargantuan three-quarter-point hikes in its last two meetings.
The government reported that the US economy shrank at an annual rate of 0.6% between April and June, a second straight quarter of economic contraction, serving as an informal signal of a recession. However, most economists have said they doubt the economy is on the verge of a recession, given that the US labor market remains strong.
Jobless claims fell again last week and remain at their lowest level since May, despite moves by the Fed to rein in inflation, which also tends to cool the job market.